taking. Specifically, the Court found that the "Government [did] not physically invade or permanently appropriate any of the employer's assets for its own use." Instead, the government enacted the statute to protect participants in ERISA plans. The Court then concluded that "[such] an interference that adjusts the benefits and burdens of economic life to promote the common good [did] not constitute a taking." Id.
The Court then acknowledged that the regulation permanently deprived the plaintiff of any money it required him to pay. Nonetheless, the Court did not find that the regulation imposed a severe economic impact on plaintiffs. In so doing, the Court noted that the assessment on the employer related to the plans to which he had contributed. Id.
Finally, the Court found that the regulation failed to interfere with any of plaintiffs' investment backed expectations. In particular, the Court declared that pension plans were and had been regulated heavily by the Government. In light of the Court's findings, the Court held that the regulation did not violate plaintiffs' rights under the takings clause.
Similarly, in Meier v. Anderson, 692 F. Supp. 546 (E.D. Pa. 1988), the court found that the provision in Pennsylvania's Health Care Services Malpractices Act (the "Act") that established the Medical Profession Liability Catastrophe Loss Fund (the "CAT Fund") did not violate the takings clause. The Act required doctors to maintain malpractice insurance and to pay an annual surcharge to the CAT fund. This surcharge amounted to between 5% and 50% of a doctor's gross income and was calculated as a percentage of the Doctor's cost for malpractice insurance. Id. at 548-49.
The Legislature enacted the surcharge to ensure adequate compensation to malpractice victims. The plaintiffs alleged that the surcharge violated their constitutional rights under the takings clause because it "placed the burden of compensating malpractice victims" on all doctors instead of on society in general or doctors who engaged in malpractice.
In reaching its decision, the court followed the analysis applied by the Connolly court. First, the court examined the type of action engaged in by the government. As in Connolly, the court found that Pennsylvania did not "physically invade or permanently appropriate any of plaintiffs' assets for its own use" but instead enacted a regulation that shifts economic burdens in order to "promote the common good." Id. at 554-56.
Second, the court noted that as in Connolly, the Act permanently deprived the plaintiffs of the money that plaintiffs had to pay pursuant to the statute. The court further reasoned, however, that the regulation did not impose an arbitrary assessment upon plaintiffs. Instead, the assessment consisted of a percentage of a plaintiff's malpractice insurance costs. Furthermore, the court noted that plaintiffs benefitted from the Act. In particular, the Act excluded them from liability for malpractice claims that exceeded their insurance contributions. Id.
Finally, the court concluded that plaintiffs had no reasonable investment backed expectations. First, the court explained that if the Legislature had not passed the statute, plaintiffs would have expected to incur costs for a malpractice judgment entered against them. Second, the court held that the state had regulated medicine over a long period of time. In view of these considerations, the court held the Act did not violate the takings clause. Id.
In the instant case, as in the cases discussed above, plaintiffs have failed to show that the inclusion of certain costs in the DRG rate constitutes an unconstitutional taking of their property. New Jersey has not "physically invaded or permanently appropriated for its own use any of plaintiffs' assets." Instead, New Jersey has enacted Chapter 83 in order to promote the public good. Simply because this statute and the regulations promulgated under it, "adjusts the benefits and burdens of economic life," it is not transformed into a taking of plaintiffs' property.
Furthermore, even though the statute permanently deprives plaintiffs of the costs associated with the DRG charges, this does not weigh in favor of this Court finding a taking. In particular, as in both Connolly and Meier, the amount of money exacted from plaintiffs is not determined on an ad hoc basis. The amount of money charged is directly related to the individual plaintiffs' hospital bill. Moreover, plaintiffs benefit from the Act for two reasons. First, it not only allows hospitals to maintain a higher level of care, but in some cases it also allows them to continue to provide health care. Moreover, the regulations would allow the individual plaintiffs to receive quality health care if they ever were unable to afford their hospital bills.
Finally, plaintiffs could not have had a reasonable investment backed expectation. New Jersey has regulated hospitals and hospital rates for many years. Moreover, even if New Jersey did not enact Chapter 83, hospitals would still charge plaintiffs for uncompensated care and the medicare differential so they could comply with their statutory obligation to provide hospital care for everyone regardless of that person's ability to pay. For these reasons, this Court finds that plaintiffs have failed to show that the costs included in the DRG rate rise to the level of an unconstitutional taking of property.
For the reasons expressed above, this Court grants defendants' motion for summary judgment as to defendants' state and federal constitutional claims. Further, this Court grants plaintiffs' motion for summary judgment as to the ERISA pre-emption claim. In particular, this Court finds ERISA pre-empts the sections of Chapter 83 and the corresponding regulations that mandate uncompensated care, allow the Medicare differential, allow the payor discounts, and allow for appeals of the DRG rate charged to a particular patient.
An appropriate order is attached.
Dated: May 27, 1992
ALFRED M. WOLIN, U.S.D.J.
In accordance with the Court's Opinion filed herewith,
It is on this 27th day of May, 1992,
ORDERED that ERISA pre-empts the sections of Chapter 83, and the regulations promulgated thereunder, that allow for the inclusion of uncompensated care, the Medicare Cost Shift, Payor Discounts and appeals of the DRG rate for patients whose DRG rate exceeds total cost by at least $ 250.00; and it is further
ORDERED that the State Defendants are permanently enjoined from enforcing these provisions. This permanent injunction will take effect as of June 5, 1992; and it is further
ORDERED that this Court declines to exercise its pendent and supplemental jurisdiction over plaintiffs restitution claims; and it is further
ORDERED that plaintiffs' motion for summary judgment as to its state and federal constitutional claims is denied; and it is further
ORDERED that defendants' motion for summary judgment as to plaintiffs' state and federal constitutional claims is granted; and it is further
ORDERED that defendants' claim that this Court has no jurisdiction over this suit pursuant to the Tax Injunction Act is denied; and it is further
ORDERED that the State Defendants' immunity claim brought under the Eleventh Amendment is denied.
ALFRED M. WOLIN, U.S.D.J.